Macroeconomics

Macroeconomics

Economics Help
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Costs
• • • • • • • • Fixed Costs: Variable Costs: Total Costs: Marginal Cost: Sunk Costs: These are fixed costs that do not vary with output. E.g. cost of building a factory These are costs that do vary with output E.g. electricity, raw materials Fixed + variable costs This is the cost of producing an extra unit These are costs that are not recoverable e.g. advertising = = = TC / Q VC / Q FC / Q

Average Total Cost (ATC) Average Variable Cost (AVC) Average Foxed Costs (AFC)

The Law Of Diminishing Marginal Returns
• • • Total Product (TP) Marginal Product(MP) This is the total output produced by workers This is the output produced by an extra worker

Diminishing Returns occurs in the short run when one factor is fixed (e.g. Capital) If the variable factor of production is increased there comes a point where it will become less productive. Therefore there will be a decreasing Marginal Product and increasing Marginal Cost. This is because if capital is fixed...